Young People Are Falling Into A Health Insurance Subsidy Gap

Ashante Thurston, John Riascos and Julieth Riascos talk with Mario Ricart, a private insurance agent, about buying health insurance at a kiosk at the Mall of the Americas in Miami last year.

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Originally published on March 19, 2014 3:50 pm

Some young people seeking to buy health insurance are finding themselves falling into a subsidy gap that leaves them ineligible for financial assistance that was heavily advertised.

Subsidies in the health law were designed to lower insurance costs for people who make around $11,000 to $46,000 a year.

But for young people earning toward the higher end of that range, it's more complicated than that. A new study shows that in major cities, some young people fall in that salary range but don't actually qualify for government help to pay their insurance premiums.

And as the Affordable Care Act barrels toward its March 31 enrollment deadline, insurers need people ages 18 to 34 to sign up.

Brian Loughnane is 26 and was making $36,000 a year when he looked for a policy on HealthCare.gov in December.

"There was something that said, 'You're eligible for a subsidy.' " But then, the Philadelphia resident says, "After I put in the rest of my information, it said it was zero dollars."

That's because subsidies kick in only when a baseline health plan exceeds a certain percentage of a person's income. The higher a person's income, the more expensive premiums must be before subsidies kick in. That's the young person's subsidy gap.

"What we found is that on average, once you were above $31,744 you probably were not going to qualify for a subsidy," says Kev Coleman, with the health information technology company Healthpocket. He looked at plans for young adults in eight major cities, and all of them had these subsidy gaps.

This may mean there are enough low-cost insurance options being offered in those cities, which don't cost more than 10 percent of a person's income. But Coleman points out that depending on a person's age, income and city, premiums could be as much as $250 to $350 a month, and make up nearly 10 percent of income. Will young people perceive that as affordable?

"When you combine these results with the fact that young people under the age of 35 are statistically healthier, they probably place a lower priority on the need for health insurance — this may help explain why we're seeing an underenrollment in the younger adults, versus the targets originally set by the [Obama] administration," Coleman says.

In Philadelphia, the region's largest insurer doesn't seem too worried about this.

"We're looking to get as many people as insured as possible, [to] make sure they're aware the deadline is coming," says Koleen Cavanaugh, a director of marketing for Independence Blue Cross, one of two companies offering plans on Philadelphia's exchange. She says more than 90,000 people in the region, across all ages, have enrolled in their plans since Oct. 1, 2013, the beginning of open enrollment.

"Back in January if we looked at the numbers, we had about 21 percent enrollment in the millennial population; we're now around 31 percent, so we've seen a nice uptick in February and March enrollment numbers," Cavanaugh says, as she works in a tent near City Hall where agents are helping people sign up.

According to Cavanaugh, the majority of those young adults have been eligible for subsidies.

An earlier government study found that about half of young adults nationwide are eligible for a basic plan that costs $50 a month or less. But that does not include Loughnane, who was aging out of his parents' plan. He works for a tech startup that doesn't offer insurance. "I was a completely new entrant into the marketplace so I didn't really have an idea of what I would be paying," he says.

Loughnane found a midlevel silver plan at full cost for $205 a month. Analysts like Coleman worry that might be too much for some young people and will keep them from signing up for coverage. For Loughnane, it's worth paying for it even though he's healthy. He wants coverage, in part because he saw how important insurance was for his girlfriend.

"You know, she had cancer and she beat it," Loughnane says. "That's a situation where without health insurance, you're going to get into debt for the rest of your life."

The $200-a-month plan was an easy sell: "That's less than half of what I pay each month for groceries. I have other expenses too, but for my health I'm absolutely willing to pay that."

He acknowledges other factors in his favor include Philadelphia's relatively low cost of living and not having any major debts.

In the medical field, people between the ages of 18 and 34 are sometimes called young invincibles. And they're the focus of a lot of attention right now when it comes to health care. The March 31st enrollment deadline for the Affordable Care Act is closing in. And the law banks on the participation of these younger people who tend to be healthy. Now, a study raises questions about whether the insurance plans available to young invincibles are affordable.

Here's Elana Gordon of member station WHYY in Philadelphia.

ELANA GORDON, BYLINE: Subsidies in the health law were supposed to lower insurance costs for people who make $11,000 to $46,000 a year. But it's more complicated than that. Take 26-year-old Brian Loughnane. He was making $36,000 when he looked for a policy on HealthCare.gov in December.

BRIAN LOUGHNANE: There was something that said that you're eligible for a subsidy. And, you know, after I put in the rest of my information, it said that it was zero dollars.

(LAUGHTER)

GORDON: That's because subsidies kick in only when a baseline plan exceeds a certain percentage of a person's income; it didn't in Loughnane's case. It's called a subsidy gap, according to Kevin Coleman with the health IT group HealthPocket. He recently looked at plans for young adults in eight major cities, and all of them had these subsidy gaps.

KEVIN COLEMAN: What we found is that on average, once you were above $31,744 you probably were not going to qualify for a subsidy.

GORDON: This may mean there are enough low-cost insurance options to begin with. But Coleman wonders how affordable plans might be for some young adults, and whether some would just rather pay a penalty. Depending on their age, income and city, health insurance could be as much as $250 to $350 a month, and make up nearly 10 percent of their income. That might seem like a lot for something they may never use.

COLEMAN: When you combine these results with the fact that young people, you know, under the age of 35, statistically they're healthier, they probably place a lower priority on the need for health insurance. This may help explain why we're seeing an under enrollment of the young adults, versus the targets originally set by the administration.

GORDON: But in Philadelphia, the region's largest insurer doesn't seem too worried about this. Independence Blue Cross is one of two companies offering plans on Philadelphia's exchange, and already has 90,000 signups.

KOLEEN CAVANAUGH: We're looking to get as many people as insured as possible, make sure that they're aware the deadline is coming.

GORDON: Koleen Cavanaugh is director of marketing. She's in a tent near city hall, where agents are helping people sign up.

CAVANAUGH: Back in January, if we looked at the numbers, we had about 21 percent enrollment in the millennial population. We're now around 31 percent. So we've seen a nice uptick in February and March enrollment numbers.

GORDON: Cavanaugh says the majority of those young adults have been eligible for subsidies. But that does not include 26-year-old Brian Loughnane, who was aging out of his parent's plan and works for a tech startup that doesn't offer insurance.

LOUGHNANE: I was a new, completely new entrant into the marketplace, so I didn't really have an idea really of what I would be paying.

GORDON: Loughnane found a silver plan at full cost for $200 a month. Analysts like Coleman, with HealthPocket, worry that might be too much for young people. For Loughnane, it's worth it. He's healthy but wants coverage just in case. He saw how important insurance was for his girlfriend.

LOUGHNANE: You know, she had cancer and she beat it. But that's a situation where without health insurance, you're going to get into debt for the rest of your life.

GORDON: A $200-a-month plan was an easy sell.

LOUGHNANE: That's less than half of what I pay each month for groceries. You know, I have other expenses, too, but for my health I'm absolutely willing to pay that.

GORDON: He acknowledges other factors in his favor includes Philadelphia's relatively low cost of living and not having any major debts.

For NPR News, I'm Elana Gordon in Philadelphia.

CORNISH: This story is part of the partnership with NPR, WHYY and Kaiser Health News.

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